Saturday, July 14, 2012
Center on Budget and Policy Priorities, Renters’ Tax Credit Would Promote Equity and Advance Balanced Housing Policy:
Over the past several decades, the nation’s housing policy has focused predominantly on increasing homeownership. Most federal housing expenditures now benefit families with relatively little need for assistance. About 75 percent of federal housing expenditures support homeownership, when both direct spending and tax subsidies are counted. The bulk of homeownership expenditures go to the top fifth of households by income, who typically could afford to purchase a home without subsidies. Overall, more than half of federal spending on housing benefits households with incomes above $100,000.
Meanwhile, low-income renters are far more likely than higher-income households to pay a very high share of their income for housing and to face other serious housing-related problems. Research has shown that rental assistance sharply reduces homelessness and housing instability — conditions that have a major long-term impact on children’s health and development — and generates other important benefits. Yet, federal rental assistance programs only reach about one in four eligible low-income renters, due to funding limitations.
The time is right to implement a more balanced housing policy. Policymakers in both parties have proposed reforms to homeownership tax expenditures that would make them more efficient andraise added revenues to reduce the deficit. The Bowles-Simpson and Rivlin-Domenici deficit reduction commissions and the Bush Administration’s Advisory Panel on Federal Tax Reform each proposed to convert the mortgage interest deduction to a credit that would increase revenues and reach a broader share of low- and middle-income homeowners. Congress could further improve the effectiveness and fairness of the nation’s housing expenditures by directing a modest share of the savings from reform of homeownership subsidies to address part of the unmet need for housing assistance among lower income renters, in the form of a federal renters’ tax credit.